All Forum Posts by: David M.

@Rachan Malhotra

Oh sorry, didn’t answer the rest of your question. I haven’t used threes or other hard money.

But, from what I’ve found by my own research, it’s “all over the place.” Since it’s not regulated like a std residential mortgage, everybody handles their products different.

For some, it’s okay for beginners and it has a higher interest rate than their std hard money loan. For another lender, it’s for an investor with some experience (5 years) and provides better rates (2full points) than their std hard money loan and potentially much higher limits. Another has a sliding scale on rates, max credit, and percent ratios depending on your demonstrated experience.

The pro I see on a LoC like this is you at least know how much the vender will loan you. For example, you might find this great $50M deal, but you have no experience so they won’t probably won’t take a risk on you that you can actually execute on the deal. But if you said you had a $200k deal, and they loaned 75% of the acquisition and 90% of Reno, they’d probably say yes if the arv worked out.

Make any sense?

@Rachan Malhotra

From what you’ve explained, sounds like just their terminology for a Fix n Flip Line of Credit. Many lenders have this product in some shape. It’s basically a hard money type loan secured by the property. If you ask around for Fix n Flip LoC, you’ll be able to shop around and compare

@Thomas Wormley

Honestly, I think it will give you a better understanding of how appraisers cdetermine appraisals. broker price opinions, appraisals, assessments.. they all come out differently because each profession does it differently and it is something of a judgement call.

If you want to understand the market... that’s dependent on how you learn.. maybe you just need to be in it in one way or another.. or just study it very well via Zillow or mls... or maybe lost if networking and talking to see what’s going on.. or a mix of the above or whatever works for you..

The market value is what somebody will pay for the item. Appraisers do look at the market history, amongst other factors to determine market value. It’s fine, if this approach works for you. Otherwise, there are plenty of ways to go.

I hope this helps guide you. Good luck

@Ian Gilligan

I think they are really the same. They all have data exchange ageeements with the various mls’. I’ve put a listing into the mls and immediately when I check Zillow it’s already there. Same for scheduling open houses.

Remember, in this day it’s all about the information and it’s being sold at the speed of light all over

@Phillip Costa

You can’t really determine what your tax will finally be. NJ does an “ad valorem” system, which many other states do. Quick summary:

Think of it like a balance sheet. On one side, the town needs so much funds per year to operate. On the other side is the tax roll to cover the expenses. So how to fairly tax everybody???

The sum of all the assessed values in the town is the “ratables.” So whatever percentage of the ratables to meet the town’s expenses is the tax rate.

So... if everybody’s assessments double, then the tax rate halves. The issue is in a complete reassessment, some properties go up some, and some properties go down some. This occurs all by different amounts. The key is to have your property somehow go up “less than your neighbor.” You are trying to pay (be taxed) a smaller piece of the pie than your “neighbor.”

Legally, all the towns are supposed to update their assessments every year. Costs and workload reasons, the last major assessment might have been the last crash. Some towns the Assessor does a overall increase in accordance with the overall change in the property values in the town every year. Then every few years a complete reassessment it done

In case you are wondering, at the County level, they apportion the “fair share” by town by applying a ratio that is determiende each year showing how much the local assessors are “behind.”

Hope this helps...

@Fred Shatzoff to answer your question, yes I have my own own investments, some long term rentals and flips.  I haven’t used “every” route when I’ve leveraged, and the refs have changed over the years.  So, no, I don’t know everything about lending, nor done them all, nor kept up

@Katherine Robbins

There is a strong argument now for using a C Corp, whether it be a LLC taxed as a C Corp or a straight C Corp, for flipping. With the tax cuts in 2017, whatever funds you don't take as salary and are left in the C Corp are paid at a much lower tax rate, basically 21%, than your personal return...

@Fred Shatzoff Luckily, I haven't had to do that.  Is that for hard money loans?  I assume its because the lender wants some assurance to limit risk to what is effectively their investment too, right?

@Michael Ablan With the recent tax cut, the C Corp looks much better since the overall tax rate is even less, so you can keep more money in your C Corp to keep flipping.  At basically 21%, you can't beat that since your personal tax rates are much higher plus SE tax (if you aren't using a S Corp).  Meanwhile, you just pay yourself a salary to live on so that is no different than any other tax plan.  Also, now you have a W2 to show for your salary instead of a complicated tax return to show to a lender.  That's the quick version...  Otherwise, second requiring the operating agreement.

@Armand Farr

Oh, if you didn't create any partnerships, then yes, something like that.  I've never dealt with a ownership with joint tenancy (or something like that).  I figure somewhere in the tax return you state your percentage ownership/interest, and then your gains/losses are adjusted accordingly.

Also, think about this way...  If you never registered/filed the business entity, then you don't have a Federal EIN (we are staying just on Federal here) under which to make a filing.  So, you can' t file a partnership return because the Federal IRS doesn't have a partnership registered.  Right?  Everything is keyed to a SSN or EIN as I am used to...

That's my layman's two cents.

@Armand Farr

While I am not a CPA, this shouldn't be that complicated from what you have laid out.  While I am not trying to speak out of turn, let me give you my two cents:

Properties A and B were held in the same partnership entity.  So, that is one filing and each of the three partners will get a K-1 form.

But, for Property C, I thought when you dissolved the LLC its a taxable event. Actually, I think it depends on how you elected LLC to be taxed. Then, as individuals I am fuzzy. For the time that the LLC held the properties, it will have to file a return and generate a K-1 (assuming it was taxed as a partnership and not a C or S Corp). Then, if you didn't create a partnership to hold the property, then it straight onto your personal tax returns and you each report your percent interest on the property. I've done this before, and I'm sure it will depend on how the four of you individually hold Title.

Sorry I couldn't be of more assistance.  But, I thought I'd chime in help work this through.